The potential contribution of multinationals to the development of poor countries is large. Its realisation depends mainly on the development of stable governments in those countries and their actions to encourage private investment.
Any developing country that offers political stability, respect for contracts, financial responsibility and equitable taxation will attract investment, foreign and domestic. The remarkable evolution of such lands as Hong Kong and Taiwan testify to this truth.
Private business investment is superior to governmental aid as an instrument of development because it combines transfer of managerial and technical assistance with that of capital.
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General dissatisfaction with bilateral government aid makes it important to expand the flow of business investment. While measures to limit or to insure against risks will help to enlarge this flow, they will not remove the root cause of international tensions.
The foreign subsidiary of an American corporation will still be charged with exploitation of local resources and with taking out too much profit.
When it pays higher than prevailing wages and benefits to its employees, their higher living standards will provoke envy and resentment among other local citizens.
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Multinational corporations plough back their profits on a significant scale. This removes to some extent the basis of the charge that they indulge in economic drain. But some countries also feel that ploughing back of profits is not a good solution because it increases the foreign stake in a country’s economy and polity.
American corporate investment in developing countries has been gradually shifting from an earlier emphasis upon the mining, extractive and raw material industries towards diversified manufacturing and merchandising operations.
One important consequence has been a great increase in American exports of technological and managerial skills and knowledge to the recipient country. This shift will serve to reduce the charge of foreign exploitation.
Multinational corporations are careers of new values and ideas that threaten the old ways that have served the people of developing countries well. MNC introduces the idea of meritocracy instead of aristocracy, of rewarding talent instead of status, of distinguishing people by ability instead of by colour or sex.